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SPRING 2014
INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT (FIN630)
ASSIGNMENT NO. 1
DUE DATE: 21ST MAY, 2014
MARKS: 15

Assignment Question: 

Mr. A, a short period investor, always looks for the stocks offering quick gains in
the market. He has now Rs. 100,000 with him and wants to invest in XYZ
Company. He has come to know that XYZ Company is going through a difficult
financial period. Over the past three years, its stock price has dropped from Rs. 50
to Rs. 20 per share. Throughout this decline, XYZ Company has managed to pay
a Re. 1 dividend each year. The company’s management feels that the worst is
over and expects the dividends to grow at 6% per year for next three years.
Afterwards, they plan to increase it by 9% per year indefinitely. Comparable
stocks are returning 13%.
For taking an investment decision, Mr. A relies upon both fundamental and
technical analyses. He uses to consult various charts including line chart, to
predict the price trends in the shorter period. For that purpose, he has plotted the
following line graph by using recent date of historical, current and forecasted
prices of XYZ Company’s stock:

Required:

a) Compute the value of company's share now?

b)Do you think that point 'a' in graph, it's a good investment for the short term?

That is should Mr.A buy should buy it with the expectation of selling it in short period.Your opinion should be based on logical reason keeping in view the fundamental analysis  the part a?

Views: 10195

Replies to This Discussion

Come on Discuss this.........

Technical Analysis

amir plz discuss it what to do??

i think k chart ko daikhty huway ans daina hy for example 16 may ko priceof share is 25 ,and a point best hy investmnt k liy q k after every 7 r 8 days company k share ki price increase ker rhe aur then decrease ,

m i right

lets discuss it on monday

isko b dekh lo koi yar

Value of company share can be calculated by dividend discount model.

Point "A" is a good point for short term investment. The price is at minimum and afterward the trend is going to upward. 

But is should be sold before are on 1st JUN, because there is forecast of rapid decline in price after that date.

Dividend Discount Model (DDM)

my ans = 6.67

any person have a other anser tell me 

m a rit or not???

in my other thinking 

Present Stock Value = DividendShare / (RDiscount – RDividend Growth)   =

        P0 = D / K-G 

        =   20 / (0.13 – 0.06)

         = 20 / 0.07

          =   285.7 = 286 

tell me anyone m riteeeeeeeeee or not

Ayesha 6% growth rate is for 3 years, next forecast is 9% for the following. So I think our calculations should explain this phenomena. 

amir afterwrd expacting growth rate increases by 9% per year 

but for the next three year 6%.

plz explain more this point may b m wrong in there/

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